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The economic argument not being watertight is the problem. This is why tech companies keep pivoting to ads, they just didn't make enough money otherwise. Afaik

The economic argument not being watertight is the problem. This is why tech companies keep pivoting to ads, they just didn't make enough money otherwise. Afaik [1], there's about 5 employees and the revenue only covers server expenses while they're still trying to get more headcount. Not an expert on bootstrapping but I'm pretty sure you don't want to expand faster than your revenue does otherwise you stop being able to make all the decisions for the company. [1]: https://blog.kagi.com/status-update-first-three-months https://blog.kagi.com/status-update-first-three-months

BasilPH 4y ago
They mention that users can invest in them through SAFEs. This only makes sense if they plan an exit, either by selling or through an IPO, or am I missing something?
- simonbw 4y ago
  I think it implies that they intend to take VC money at some point in the future, like a series A, and they’re trying to avoid VC money now while they can get better terms. I don’t know if that necessarily means they plan an exit, or if they’d be happy just being profitable, but I do think it implies they plan to grow significantly. EDIT: Their website says that they don’t plan to take VC money, so I have no idea what a SAFE means in this case. The point of a SAFE is that the investor is guaranteed the best terms when a priced round of investment happens.
- freediver 4y ago
  Other options include going public or paying out dividends.
  - lmeyerov 4y ago
    Going public is a qualified event for a SAFE to convert -- it is a financing -- but curious about the dividends SAFEs are often capped, so taking awhile doesn't matter so much, except maybe interest calcs
    - freediver 4y ago
      If a company is doing sustainably well, supposedly you could have a mutually agreeable mechanism to convert SAFEs to equity (at cap for example) and treat shaleholders with dividends.
- wardedVibe 4y ago
  Is this some sort of hack towards a co-op? I couldn't find anything about it on their website
TimTheTinker 4y ago
The problem is that ad revenue so often becomes the escape hatch from an economically hard problem. Need more money? Economic model not quite working? Companies face this all the time. Some solve it innovatively, survive, and show everyone else the way forward. Others fold or pivot. But ad revenue short-circuits the hard process of economic innovation by tempting tech companies to take an easy way out, even when the problem is solvable without it. (All of this wouldn't really be a problem if the ads business model weren't inherently adversarial against users.)
twobitshifter 4y ago
The sad truth is on average advertisers will pay more for your attention than you’ll pay not to have ads. So people continually complain about YouTube ads but ignore their option to pay to have them removed.
- t0bia_s 4y ago
  Why wasting money on "feature" that can be done with same result for free? uBlock, NextDNS, pihole, etc. No-one is asking for ads by default, ever.
  - syntaxfree 4y ago
    With YouTube premium you can listen to videos on the iPhone with the app in second plane or even with the phone locked. Yeah, I should use a hacked rooted Android yadda yadda. But I just spent a week hacking and hawking for my life in an ICU, and I certainly didn’t want sanity-saving podcasts to shut down whilst on an hour-long stay at the breathing machine. Life is short.
- widdershins 4y ago
  I pay for YouTube too. Between that and Kagi search, it's ~$20 per month. Which seems crazy in today's environment of 'everything free'. But seriously, I use these both all day for both work and play, but I only watch an hour of Netflix a day. So which is really more valuable? I agree that on the whole, people will continue to go for the free option, but I'm just glad that some options are appearing to pay, which rebalances the incentives a bit.
mikepurvis 4y ago
"This is why tech companies keep pivoting to ads" I think another factor is the paradox that the user who has enough money to be willing to pay to not see another ad is exactly the most valuable user to advertisers— they've pre-qualified themselves on multiple axes. So there is always going to be an enormous moral hazard here with the ad-driven-freemium model— always a temptation to run an occasional high-value ad to the paying users, or to disguise the ad as a "recommendation" or position it instead as a "sponsorship", or whatever else. Other than users reacting swiftly and decisively against this kind of thing, it's hard to know how else to keep companies away from it.
- akhilpotla 4y ago
  One of the problems is price point. They are charging $10/month. While increasing the price will certainly decrease the number of users, a much higher price point could select for "power users" that will churn less and pay substantially more. In the long run that could lead to greater revenue. Of course this depends on how the supply demand curve looks like for their specific business.
  - nottorp 4y ago
    Catering to the whales, in casino speak.
- random314 4y ago
  This showed up at an internal Twitter meeting this week. Mr. Musk proposed making Twitter ad free for 8$ accounts before being politely informed that 8$ accounts actually produce 50$ per month in ad revenue. An angry bird informed me about this :)
  - auggierose 4y ago
    How do they know that, given that $8 accounts must be still pretty rare given they were just introduced?
    - 4y ago
matheusmoreira 4y ago
> This is why tech companies keep pivoting to ads The reason they advertise is because they can. It doesn't matter how much money they're making now, they can always make more by advertising. Paying money just makes your attention more valuable. The only way to stop them is to make it impossible or illegal to advertise. Blocking ads everywhere and making no exceptions.
- wardedVibe 4y ago
  When google started, they were having difficulty staying solvent until they added ads, even though they had a better product than the other search engines. Its a space that's ill-suited to market solutions.
  - matheusmoreira 4y ago
    If their solution to insolvency is advertising, then let them be insolvent. We're not gonna keep enabling this behavior.
pixodaros 4y ago
"Enough money" is usually defined by venture capitalists who want ALL THE MONEY and not by normal investors who want a modest predictable return. Patreon, for example, could have been a modestly profitable business which owned itself, but instead they keep flailing and spending lots of other people's money to satisfy the next batch of investors that one day they will be as rich as Google.

BasilPH 4y ago

They mention that users can invest in them through SAFEs. This only makes sense if they plan an exit, either by selling or through an IPO, or am I missing something?

simonbw 4y ago
I think it implies that they intend to take VC money at some point in the future, like a series A, and they’re trying to avoid VC money now while they can get better terms. I don’t know if that necessarily means they plan an exit, or if they’d be happy just being profitable, but I do think it implies they plan to grow significantly. EDIT: Their website says that they don’t plan to take VC money, so I have no idea what a SAFE means in this case. The point of a SAFE is that the investor is guaranteed the best terms when a priced round of investment happens.
freediver 4y ago
Other options include going public or paying out dividends.
- lmeyerov 4y ago
  Going public is a qualified event for a SAFE to convert -- it is a financing -- but curious about the dividends SAFEs are often capped, so taking awhile doesn't matter so much, except maybe interest calcs
  - freediver 4y ago
    If a company is doing sustainably well, supposedly you could have a mutually agreeable mechanism to convert SAFEs to equity (at cap for example) and treat shaleholders with dividends.
wardedVibe 4y ago
Is this some sort of hack towards a co-op? I couldn't find anything about it on their website

TimTheTinker 4y ago

The problem is that ad revenue so often becomes the escape hatch from an economically hard problem. Need more money? Economic model not quite working? Companies face this all the time. Some solve it innovatively, survive, and show everyone else the way forward. Others fold or pivot. But ad revenue short-circuits the hard process of economic innovation by tempting tech companies to take an easy way out, even when the problem is solvable without it. (All of this wouldn't really be a problem if the ads business model weren't inherently adversarial against users.)

twobitshifter 4y ago

The sad truth is on average advertisers will pay more for your attention than you’ll pay not to have ads. So people continually complain about YouTube ads but ignore their option to pay to have them removed.

t0bia_s 4y ago
Why wasting money on "feature" that can be done with same result for free? uBlock, NextDNS, pihole, etc. No-one is asking for ads by default, ever.
- syntaxfree 4y ago
  With YouTube premium you can listen to videos on the iPhone with the app in second plane or even with the phone locked. Yeah, I should use a hacked rooted Android yadda yadda. But I just spent a week hacking and hawking for my life in an ICU, and I certainly didn’t want sanity-saving podcasts to shut down whilst on an hour-long stay at the breathing machine. Life is short.
widdershins 4y ago
I pay for YouTube too. Between that and Kagi search, it's ~$20 per month. Which seems crazy in today's environment of 'everything free'. But seriously, I use these both all day for both work and play, but I only watch an hour of Netflix a day. So which is really more valuable? I agree that on the whole, people will continue to go for the free option, but I'm just glad that some options are appearing to pay, which rebalances the incentives a bit.

mikepurvis 4y ago

"This is why tech companies keep pivoting to ads" I think another factor is the paradox that the user who has enough money to be willing to pay to not see another ad is exactly the most valuable user to advertisers— they've pre-qualified themselves on multiple axes. So there is always going to be an enormous moral hazard here with the ad-driven-freemium model— always a temptation to run an occasional high-value ad to the paying users, or to disguise the ad as a "recommendation" or position it instead as a "sponsorship", or whatever else. Other than users reacting swiftly and decisively against this kind of thing, it's hard to know how else to keep companies away from it.

akhilpotla 4y ago
One of the problems is price point. They are charging $10/month. While increasing the price will certainly decrease the number of users, a much higher price point could select for "power users" that will churn less and pay substantially more. In the long run that could lead to greater revenue. Of course this depends on how the supply demand curve looks like for their specific business.
- nottorp 4y ago
  Catering to the whales, in casino speak.
random314 4y ago
This showed up at an internal Twitter meeting this week. Mr. Musk proposed making Twitter ad free for 8$ accounts before being politely informed that 8$ accounts actually produce 50$ per month in ad revenue. An angry bird informed me about this :)
- auggierose 4y ago
  How do they know that, given that $8 accounts must be still pretty rare given they were just introduced?
  - 4y ago

matheusmoreira 4y ago

> This is why tech companies keep pivoting to ads The reason they advertise is because they can. It doesn't matter how much money they're making now, they can always make more by advertising. Paying money just makes your attention more valuable. The only way to stop them is to make it impossible or illegal to advertise. Blocking ads everywhere and making no exceptions.

wardedVibe 4y ago
When google started, they were having difficulty staying solvent until they added ads, even though they had a better product than the other search engines. Its a space that's ill-suited to market solutions.
- matheusmoreira 4y ago
  If their solution to insolvency is advertising, then let them be insolvent. We're not gonna keep enabling this behavior.

pixodaros 4y ago

"Enough money" is usually defined by venture capitalists who want ALL THE MONEY and not by normal investors who want a modest predictable return. Patreon, for example, could have been a modestly profitable business which owned itself, but instead they keep flailing and spending lots of other people's money to satisfy the next batch of investors that one day they will be as rich as Google.